Pros and Cons of Using Your Same Lender to Refinance

My wife, Synnove, and I are refinancing once again to get a lower rate. The new loan is a 30-year fixed at 4.625% with 1 point. Plus we are paying down the mortgage to get the lower rate that comes with a conforming loan and lock-in the lowest possible payment.

After shopping rates and fees with three lenders, we made a Good Faith Estimate chart of fees (all the rates were identical) to guide our decision. Doing that comparison we learned two things about the costs of refinancing with the same lender who holds your mortgage now.  One pro, one con.

1. Pro: Because our current loan was taken out after 2005 (in fact in 2007), we do NOT have to pay county/city/state transfer taxes (stamps) if we refinance with the same lender.  This saves us about $1400 at closing.  (Thus we went with our current lender, whose fees were slightly higher than other lenders but the transfer tax savings tipped the decision to our current lender.)
2. Con: Now that we are refinancing with the same lender, however, we CANNOT deduct the outstanding points from the first loan this year (with a different lender we would get the tax break of deducting as interest the non-amortized points from the previous refinance).  Instead, the refinance points this time are added to the outstanding points charged on the first refinancing and the combined total is deducted over the life of the 30-year loan.  Thus, we miss out on the tax deduction in 2009 on the outstanding points from the first loan ($4,900 x 33% = $1,617) because we used our current lender.

In the end, the pros and the cons wash each other out. Yet, after all the refi’s we’ve done over the years (this is our eighth) there is always something new to be learned about the process.